When it comes to commercial property, one of the sectors that have really come to the forefront in the past few years is the Industrial and Logistics sector. These commercial properties consist mainly of warehouse and factory space and the demand for these spaces has reached new heights recently – especially since the COVID-19 pandemic changed the way that consumers buy and companies are run.
This has led to a rise in the number of warehouse spaces being created, with massive building projects and rocketing rental prices. We are now beginning to see a reduction in the demand for these spaces, which begs the question – is this a downturn in demand, or is it a small hitch that will flatten itself out?
Challenges to the Industrial and Logistics Sector
Some of the challenges that the Industrial and Logistics sector have seen that come from outside the industry include inflationary pressures, the effects of Brexit, a relatively unstable government, low consumer confidence, the cost of living crisis, higher energy bills, and a country teetering on the brink of a recession. In fact, it’s quite a feat that it is surviving at all!
Inflation and higher energy bills have made everything more expensive for businesses as well as the public. This has meant that they have been unable to grow to the same extent as before, with the cost of running a company as well as mortgage rates rising.
The cost of living crisis and rising energy bills have also had an effect on consumers, reducing confidence and an unstable government (lots of changes in the Prime Minister, for example) can lead to a more unstable economy.
Brexit has presented challenges, especially for businesses that rely on imports or exports, and this may have affected their ability to grow.
Demand for Warehouse Space
Despite these challenges, the reality is that demand for warehouse space is still strong. The pandemic did not change the way that we buy things, but it accelerated the use of online shopping among businesses and the public, and it bolstered the use of robotics and Artificial Intelligence in the manufacturing industry.
There is a general belief in the industry that rental prices for the Industrial and Logistics sector will not dip much this year – despite all the challenges that we mentioned above. There is still a high demand for commercial warehouse and manufacturing space in the UK. Although the high street has had a degree of a revival, online shopping is not going anywhere fast!
What we are actually seeing is an increase in the amount of commercial warehouse space available in the UK as well as potentially businesses looking to reduce their costs thanks to the challenges that they are facing.
So, what does all this mean for the future of the Industrial and Logistics sector in the UK?
The Future of the Industrial and Logistics Sector in the UK
Looking at the future of business along with the challenges that are being faced by businesses in the Industrial and Logistics sector, it is clear to see that the difficulties that they are currently facing are just a blip in an otherwise rising trend.
The hope is that inflation settles (or even decreases), the Brexit challenges reduce, the country becomes more stable politically, the cost of living improves and energy bills stabilise, and the UK avoids a significant recession.
What we do know is that factors such as online shopping with the need for warehouse space, drop-shipping businesses, the need for delivery hubs, data warehouse space, and somewhere to manufacture products are not going anywhere any time soon.
It is also important to bear in mind that the COVID-19 pandemic was a gift for the Industrial and Logistics sector. It switched the world onto the benefits of online, well, everything. From food shopping to work meetings, to streaming (with a need for more data space) and WFH, there was a massive rise in demand for this space – and space that does not necessarily need to be in the centre of town – in fact, out of town is often preferred.
What we are beginning to see now, is a flattening out after this rocketing demand, continuing to grow, but at a slower rate.
It is, in fact, widely believed that compared to other commercial property sectors such as office space and retail units, Industrial and Logistics is likely to do the best. It is a resilient sector and provides excellent means for businesses to get through what is being described as a challenging period.
Here at Boxpod, we have noticed that the market is still seeing more movement than before the COVID-19 pandemic, a sign that we are just seeing a slight hitch in the speedy ascent of the Industrial and Logistics sector.
What Makes a Good Industrial and Logistics Space?
When you are looking to buy or rent an Industrial and Logistics space such as a warehouse, there are a few different aspects that should be considered before you go ahead.
The first consideration is that the space fits your needs in terms of space and facilities. Regardless of anything thing else, it is important that you get this right. Perhaps you need an extra large space, office space included, a particular type of warehouse door, the right amount of energy supply, or adequate parking, for example.
After this, the next important factor is the space’s location. Location is very important when you are needing to deliver or distribute products. Fortunately, space out of town is often less expensive, although you will probably pay more for warehouse space that is close to main roads or other distribution centres such as shipping ports or airports.
Location is another important factor in terms of the personnel that you are having in the commercial space. You need to be as convenient as possible a location for them to ensure that they stay happy and motivated.
Another aspect that should be considered is the commercial space’s green credentials. Is the space insulated? Is it powered by renewable energy sources? Or does it utilise any waste products that are created (heat produced from data centres, for example)?
Final Thoughts
Whatever reason you are looking for an Industrial and Logistics space, you are not alone. Despite the challenges that the sector is currently facing, it is thriving (although perhaps not as much as it was previously). This leads us to believe that we are seeing just a hitch in the road in the upwards direction of this industry, with growth perhaps not as prolific as it has been, but one thing is for sure, the Industrial and Logistics sector is heavily involved in the future.
Whether you are looking for a commercial warehouse space to rent, a manufacturing facility, a retail unit, a workshop, or other commercial property, why not have a look through what we have to offer here at Boxpod? You could find your perfect match!
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